As the Chinese e-commerce market continues to grow by leaps and bounds, more sellers are viewing it with a gleam in their eyes. If you’re one of them, great—but don’t assume success will happen overnight. To capture sales in China, you’ll need a comprehensive strategy that re-examines many of the assumptions underlying your current approach. And while it may not be easy, developing the right strategy up front will help you reap far greater rewards in the long run.
The China e-commerce climate: Hot and getting hotter
In recent years, steady growth in disposable income combined with increased Internet access and mobile device use has transformed the way Chinese buyers shop, fueling an e-commerce boom that extends well beyond urban areas into lower-tier cities. Government encouragement of e-commerce and a fragmented, weakening offline retail sector have contributed to the shift, making Chinese customers eager for the convenience of purchasing online. Today the country’s 302 million online buyers are the world’s most active, making purchases at a rate almost three times greater than the global average.
As a result, China has become the world’s largest e-commerce economy—even while its overall economy slows—and this trend shows no signs of stopping. Kinsey predicts that by 2020, China’s online retail market will be as big as the current US, Japanese, UK, German, and French markets combined. And B2B sales comprise a major portion of this expanding e-commerce landscape, with revenues totaling US$2.76 billion in 2013, an uplift of 25% year-on-year. The situation clearly offers big opportunities for both domestic and international sellers.[i]
Strategies for Sino success
So how can you gain a foothold in the fast-growing Chinese market? While the best approach will vary based on your business, these tips can help direct your efforts:
- Think long term, not quick fix. “You can find success in China, but only if you let go of your short-term focus,” says Helen Tang, NetApp’s head of alliance and channel business in China. “Many Western companies grossly underestimate the investment and commitment required.” She recommends developing a business plan covering at least a decade of investments and milestones.[ii] Just as important: tap insider knowledge from those with expertise in the region. Because even if you already have a strong e-commerce business established, what works in the West won’t necessarily win in China.
- Connect with the commish. If you’re new to the market, contacting the US trade commissioner in China is a good first step. “The US government has a team of people helping US companies by combing through the complexity of doing business in China,” says Helen. “Other Western governments have similar structures in place.”
- Make social and mobile your mainstays. With web-savvy millennials making up the largest portion of buyers in China—and social media influencing purchasing decisions more there than in any other country[iii]—social platforms like Weibo and Wechat should play a central role in your strategy (this blog offers useful insights on using them to expand brand awareness, generate leads, and strengthen relationships).[iv] What’s more, China’s mobile internet users exceeded PC users two years ago, making mobile commerce a critical component in any e-commerce approach. “Mobile commerce is the way forward,” says Burghardt Groeber, vice president – greater China for hybris software. And as technology and infrastructure development clears away logistical challenges, “More and more brands will be able to capture new opportunities, most notably in lower-tiered cities and the newly emerging middle class.”[v]
- Divide and conquer. Despite the popularity of e-commerce, physical stores and showrooms still loom large in the Chinese buying experience; personal interactions can carry real market clout. “Most sales in China require an offline element to close the deal,” Burghardt says. Mindful of this, a growing number of sellers are adopting a multi-channel approach that integrates both online and offline elements as a way to maximize customer engagement. For example, while Staples sells in China primarily through its own e-commerce marketplace, it has also launched a Tmall store and established retail outlets offering one-hour delivery as part of its strategy to build market share. Capitalizing on offline assets and capabilities to offer valued post-sales services (such as locally provided repairs or exchanges) can also serve as a powerful way to differentiate yourself from online-only sellers.[vi]
- Mix it up with marketplaces. Online marketplaces can be another valuable resource for boosting brand awareness and sales in China. Rather than having to launch your own e-commerce website—a costly endeavor that some sellers cannot afford—you can use marketplaces to gain fast market entry and low- or no-cost access to a huge existing user base. Close to 90% of Chinese e-commerce transactions occur on these marketplaces, with Alibaba controlling the highest market share (46%) in the B2B sector.[vii]
- Don’t go it alone. Finding local, trusted partners will increase your chances of success, says Helen, making it easier for you to:
- Penetrate a massive and diverse market, with a population four times bigger than that of the United States that’s growing fastest in tier-2, -3, and -4 cities.
- Compete more effectively against Chinese companies, which have increasingly claimed top ranking in recent years.
- Navigate the subtleties of government policy, which heavily influences the Chinese market and favors local brands; the 13th Five-Year Plan (which will direct Chinese policymaking from 2016 to 2020 and set targets and guidelines for social, environmental, and economic development) plays a crucial role here.
- Understand and fulfill local requirements as well as cultural mores and acceptable marketing practices, which differ markedly from those in the West. For example:
- § Rather than buying stand-alone technology to set up for themselves, Chinese buyers expect a total solution put together by local system integrators.
- § Commonly used Western approaches such as “spiff” award programs could offend Chinese customers, and local partners can offer guidance on creating appropriate and effective alternatives.
- Offer superior support. If you think support in Standard Chinese will suffice, think again. Chinese buyers expect sellers to offer 24x7 support in their regional dialects, requiring service in at least 10 different languages to cover the entire market; local partners can help you meet this demand.
For more insights and ideas on ways to win in Chinese e-commerc
[i] Statistics and conclusions in this and the preceding paragraph drawn from “State of Ecommerce in China,” a report developed by Econsultancy in association with SAP and hybris software, 2014, pp. 6, 8-11, and 16.
[iii] “State of Ecommerce in China,” pp. 6, 10, and 20.
[iv] Yi Wu-Blumenschein, “Two Casestudies: Weibo & Wechat for B2B Companies in China,” effective world blog post, 2 April 2014.
[v] “State of Ecommerce in China,” p. 6.
[vi] “State of Ecommerce in China,” pp. 6, 19, and 23.
[vii] “State of Ecommerce in China,” pp. 11, 16-17, and 22-23.